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Many assessments of the Australian
superannuation system come from
insiders and providers, but how do
the customers feel? Do they rate the system
as highly?
A Willis Towers Watson global survey has
compared how the Australian consumer of
superannuation services feels next to pension
fund members in other countries.
The global survey, conducted every two years,
assesses the attitudes of employees towards
the superannuation system, their retirement
readiness and their confidence to meet an
adequate standard of living. The most recent
survey, conducted in 2015, captured responses
from nearly 30,000 employees in 19 countries.
Over 1,000 of the employees were from
Australia, with the sample deliberately designed
to be representative of private sector employees
working in larger companies.
The survey uncovered three key areas
of interest:
• confidence in being able to generate
sufficient resources in retirement
• expectations around the age at which
retirement will be possible
• attitudes towards risk.
The survey found that for 80 per cent of
Australian employees in large organisations, the
employer superannuation plan is the primary
way in which they are saving for retirement.
Employees revealed they feel vulnerable and are
not confident in their ability to generate sufficient
resources for retirement so their planned response
is to work longer and retire later. Further, if
the opportunity arose, employees expressed a
willingness to pay for greater security of their
retirement income.
So, when a survey of Australian employees
finds a material level of concern about their
ability to meet their retirement income needs,
how should superannuation funds respond? If
employees were found to be worried about their
ability to generate a retirement income to meet
their needs, what does that indicate?
If employees are worried, they tend to be less
effective at work, which may increase stress and
hinder the ability to generate income growth
and without that, the ability to meet daily
living expenses is threatened. When a choice
must be made between paying the rent, or the
electricity bill, or food and clothing and saving
for retirement, it is not hard to understand why
retirement savings could take a lower priority.
RESOURCES IN RETIREMENT
In respect to having enough resources to last 25
years in retirement, Australians are less confident
than the global average. In Australia, three in five
employees feel this way compared to one in two
globally.
A retirement period of 25 years is no longer
unusual – life expectancy at age 65 in Australia
is a little over 20 years for men and 22 years for
women and growing. Age 65 has been a nominal
benchmark age for retirement, in many countries,
for many years. Superannuation benefits generally
did not accrue after age 65 and about 20 years
ago, early retirement was reasonably common.
However, over the last 20 years, the rate of
employment of over 65s has doubled. In Australia
today, 17 per cent of over 65s are in employment,
up from eight per cent in 1993. That rate is
going to grow: one in two Australian employees
believe that they will still be working at age 70.
This is a higher proportion than any other country
surveyed.
Of all the employees expecting to still be
working at age 70, the highest proportion was
in the under age 30 group, possibly reflecting
a realistic assessment of increasing longevity
and ongoing improvements in healthcare.
Perhaps it also includes scepticism of the ability
Superfunds July 2016